Intriguing proposition, isn’t it? The idea of utilizing corporate capital to extinguish a mortgage within 15 years holds appeal. For incorporated physicians across Canada, this opportunity exists with strategic planning and the implementation of an insurance solution, specifically, a Split Dollar Critical Illness (SDCI) policy.

Defining SDCI A SDCI plan involves an insurance policy owned by the Medical Professional Corporation (MPC) with the physician as the insured party. Given its nature as a critical illness insurance, it safeguards the MPC in scenarios involving serious health conditions, such as strokes, heart attacks, cancer, and more.

The distinctiveness of a SDCI policy lies in its integration of a return of premium (ROP) feature, financed personally by the physician. This component, in conjunction with the primary policy funded by the MPC, forms the foundation of the SDCI approach, dividing the policy’s ownership and financial responsibilities from the outset.

Strategy Insights

  • Critical illness coverage is held by the Corporation.
  • Corporation secures return of premium upon death.
  • Physician personally secures the return of premium at term’s end.
  • Critical illness premium payments are the responsibility of the Corporation.
  • Physician personally covers the return of premium costs.
  • Over a 15-year span, the Corporation contributes $35,000 annually. Upon reaching the 15th year, the physician can terminate the policy, exercising their ROP option.
  • The physician is then issued a $525,000 cheque ($35,000 x 15), received tax-free at the 15th year.
  • Should the physician face disability within this 15-year framework, premium payments are deferred until the resolution of the disability.
  • In the event of the physician encountering a critical illness during the coverage span, the Corporation is compensated with a significant tax-free sum from the insurance entity. While not the primary objective, this serves as an advantageous byproduct.
  • Absence of critical illness during the coverage term allows the physician to claim the ROP benefit, personally receiving a $525,000 cheque tax-free.

Benefits of This Strategy

  • To amass $525,000 post-tax personally, approximately $1,050,000 in corporate cash would be required, with half allocated to taxes and the remainder to the physician.
  • A corporate investment of $35,000 annually over 15 years would necessitate an average annual compound growth rate of 9.3% to accumulate $1,050,000.
  • This approach effectively mirrors a 9.3% return rate, achieved through tax savings without exposure to market volatility.

Assessing Suitability for This Strategy If you are a physician in Canada with a preference for tax efficiency and assured returns, this strategy aligns with your financial profile. Adequate annual corporate savings are necessary to support the policy, with the example set at $35,000 ideally suited for those with at least $60,000 in investable corporate funds annually and a substantial liquid portfolio.

Maximize Your Financial Strategy: Book Your Complimentary 15-Minute Consultation Now

Want to explore how corporate capital can enhance your financial stability? Our specialists are ready to navigate you through this strategy and elucidate its benefits for you. Begin your journey to financial liberation by scheduling a complimentary 15-minute consultation with us today. Discover how we can assist you in reaching your financial aspirations.

Share This Story, Choose Your Platform!